By Elliott Topkins, Esquire
10/20/11
Many times friends, or even relatives, discuss going into business together, especially in the tight jobs market we are currently experiencing today. They sense a talent or a product line which they can market together and they agree to be business partners. In a way, it is the way America has grown to its position of world economic prominence. Small ideas: small beginnings. These can blossom into large successful enterprises which are financially remunerative for the founders and their families.

I encourage each and every one of you to follow your dreams and combine with others to make the dream a reality. What I also encourage, however, is that whatever you decide to do, and whomever you decide to do it with, you enter into a written partnership agreement with the other part(ies) so that there are no misunderstandings down the road.

My thinking on this matter is as follows. No one enters into an enterprise to fail. Everyone is optimistic, and everyone expects the best. When no inventory or equipment have been purchased, or no bank loans signed, it is safe to say that each partner has roughly the same view as to what is “fair.” They have not worked, and struggled, together. When things do not go as contemplated, one of the partners may wish to leave the partnership. That can also happen when things are going well, too. Family commitments or illness or divorce or any number of other events can change the dynamics of the partnership.

In most situations, the partners still try to be “fair” when events take place down the road which cause one or more of the partners to want to leave. If there is no written partnership agreement, with precise and definite provisions for exit, disputes arise which can have disastrous effects. Most people will abide by what they have agreed to, especially if it is set forth in an enforceable agreement. If the partnership is “oral,” problems can often arise.

My advice, therefore, is for the partners to engage counsel to draft a partnership agreement which reflects the agreement of the parties. I am often asked whether each partner needs to have his or her own counsel when drafting the partnership agreement. My advice would be that it is better for all concerned if each party has competent counsel assisting with the drafting of the partnership and representing a partner’s interest. That may be expensive, but it is money worth spending, in my opinion.

If the initial budget does not provide for funds that would permit separate representation, an alternative would be for one attorney to attempt to represent the situation, and then have each partner have his or her attorney review the finished agreement to see if there are gaps or holes which may prove troublesome. However the agreement is reached, it should be “in writing” and, preferably, signed before a Notary Public.

(Mr. Topkins is an attorney with Topkins & Bevans, Braintree Executive Park, 150 Grossman Dr., Braintree, MA 02184. His blog can be found at http://realtorsresourceblog.com. His telephone number is 617/596-3184 and his e-mail address in etopkins@topbev.com.)